Without a doubt, buying and holding stocks is the best way to generate wealth over long periods of time. And we're not talking about holding for weeks or even months, but rather years of sharing the wealth created by the world's greatest businesses.
But finding stocks worthy of such a long-term commitment is easier said than done. To help get you started, we asked three Motley Fool contributors to each find a stock they would be willing to buy and hold for decades. Read on to learn why they like Walt Disney (DIS -0.83%), W.P. Carey (WPC 0.20%), and Yandex (YNDX -6.79%).
The House of Mouse (and so much more)
Steve Symington (Walt Disney): After finishing its full fiscal-year 2018 with an exceptional quarter -- with revenue climbing 12% year over year and earnings per share soaring nearly 40% -- shares of Disney have understandably climbed to all-time highs despite the broader stock market's recent pullback. But there are a number of reasons this entertainment winner should keep on winning.
To start, Disney already boasts an enviable stable of characters, content, and media properties thanks not only to its namesake movie studios and broadcast networks, but also through its ownership of ABC, an 80% stake in ESPN, half of A&E Networks, Pixar, Marvel, and Lucasfilm. But it should only grow more powerful next year with its impending massive acquisition of most the assets of Twenty-First Century Fox. The move will most notably to its repertoire a controlling stake in Hulu, Fox's film studios, and most of Fox's TV studios -- which means entertainment properties including the likes of Avatar, National Geographic, The Simpsons, This Is Us, Modern Family, as well as Marvel's Fantastic Four, Deadpool, and X-Men franchises, to name only a few.
In addition, to appease investors concerned about cord-cutting -- a trend that has undeniably put pressure on the broadcast side in recent years -- Disney is only just getting started with its investments in streaming. The company already has over 1 million subscribers to its recently launched ESPN+ streaming services, for example, which according to CEO Bob Iger continues "to see impressive growth." And it plans to follow in late 2019 with Disney+, a Netflix-esque streaming service that will offer access to a slew of Disney, Pixar, Marvel, Star Wars, and National Geographic content, including all of the studio segment's 2019 movie releases.
Taken together with the steady earnings power of Disney's parks and resorts and consumer products businesses, as well as Disney's ongoing target for returning at least 20% of all cash it generates to shareholders through dividends and stock repurchases, I think this is one of only a few stocks you can comfortably hold for decades to come.
Shifting to a pure play
Reuben Gregg Brewer (W.P. Carey Inc.): W.P. Carey has 21 years of dividend hikes under its belt. The only problem is that it historically had two business lines: a portfolio of owned properties and an asset management business that created non-traded REITs. The latter operation, which was less predictable, kept many investors away. But following Carey's acquisition of the largest of those non-traded REITs, the asset management business is basically gone.
Effectively a pure-play REIT, Carey's owned portfolio can take center stage. The REIT is structured around an opportunistically driven investment approach. It spreads its portfolio across multiple property classes, including industrial (about 28% of rents), office (23%), retail (17%), warehouse (16%), education (5%), and "other." And about a third of rents come from outside the U.S. market, largely Europe. This diversification, which is unique, allows Carey to invest where it sees the most opportunity. For example, most of its retail exposure is in Europe, where retail isn't as overbuilt.
This fits well with the company's long history of opportunistically supplying capital by acquiring buildings (frequently in off-market transactions with relatively high rates of return and favorable lease terms) and instantly inking long-term leases. Customers are often looking to use the sale proceeds for expansions or acquisitions and need a nimble and reliable partner like Carey.
Since the net lease structure means lessees are responsible for most property costs, W.P Carey gets to sit back and collect rent while it helps its lessees grow, and investors get to collect a generous and growing dividend. With a simplified business model and a 6.4% yield, there's every reason to expect the next decades to be as rewarding as the last two.
The "Google of Russia"
Leo Sun (Yandex): Many investors avoid Russian stocks due to concerns about sanctions and other geopolitical risks. Yet one Russian tech stock -- Yandex -- rallied more than 80% over the past three years and remains a promising long-term investment. Yandex owns Russia's largest search engine. Its primary competitor is Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google.
Like Google, Yandex expanded beyond search with cloud and email services, the Yandex.Browser, a virtual assistant, smart speakers, streaming videos, rides and food deliveries from Yandex.Taxi, online payments via Yandex.Checkout, a carsharing service called Yandex.Drive, and a new e-commerce platform called Beru.
That sprawling ecosystem makes it a great long-term play on several high-growth tech markets in Russia, which has an internet penetration rate of about 70% and expanding 5G networks.
Yandex expects its revenue to rise 35%-38% for the full year (excluding its deconsolidation of Yandex.Market), while analysts expect its earnings to rise 32%. Analysts also forecast Yandex's revenue and earnings to rise 28% and 49%, respectively, next year. Based on those forecasts, Yandex trades at less than 20 times earnings, which is a pretty cheap multiple for a high-growth stock.
Long-term prospects look solid for Yandex because it achieved those growth rates amid tough competition from Google and Russia's weak GDP growth (exacerbated by sanctions and low oil prices). If those headwinds wane as Yandex tightens its grip on Russia's internet users, it could climb much higher over the next few decades.
Grab some shares and stay awhile
A lot can happen over the course of decades, so there's no guarantee that these three stocks will go on to beat the market for long-term-oriented shareholders. But whether it's Disney's unrivaled entertainment industry leadership, W.P. Carey's long history of dividend growth and opportunistic investment approach, or Yandex's ability to grow in Russia despite steep competition and macroeconomic challenges, these contributors think chances are high that these stocks will deliver outsized returns for decades yet.